Private-Purpose Trust Funds

If you only read one thing A private-purpose trust fund benefits specific individuals, organizations, or other governments, not investment pool participants, the distinction that separates it from an investment trust fund.

Builds on FM9.4 Investment trust funds hold pooled investments for participating governments. Private-purpose trust funds serve a narrower, more specific beneficiary instead.

Why This Matters

This is the fund type most likely to come up for a district specifically, a restricted scholarship gift is a textbook example, and knowing the distinction from other trust types keeps it classified correctly.

What’s Actually Going On

A private-purpose trust fund benefits specific individuals, private organizations, or other governments through arrangements other than pooled investing. A scholarship fund restricted to benefit students at one specific high school is a private-purpose trust fund, since the benefit flows to specific individuals, not to investment pool participants generally.

How This Applies

When a district receives a restricted gift meant to benefit specific people, students, families, a particular program’s participants, check whether it meets the control-plus-benefit test from FM9.1 first. If it does, a private-purpose trust fund, not the General Fund, is where it belongs.